Securing affordable health coverage can be a financial struggle for both individuals and families. While it’s ideal to live a frugal lifestyle that can better ensure your own financial stability, health insurance is one area where sacrifices should be made to guarantee no medical surprises sneak up that can’t be easily taken care of. We’re going to help by breaking down the options for a working healthcare budget.
A Working Healthcare Budget
Annual healthcare expenses can range between $5,000 to $20,000 per year, so making a thorough budget that accounts for a range of possible medical costs is vital. Health care should be approached as a natural and necessary element of your spending lifestyle. Finding ways to prioritize consistent payments to your health plan is a must for any effective budget.
While organizing your finances to pay off debt is more of a reactionary measure, budgeting for health coverage can be done in such a way that you shouldn’t have to worry about amassing any burdensome debt or lingering medical charges.
Identifying Your Payments
What’s nice about factoring health coverage into a financial budget is its consistency as an expense. The premium paid to your insurers, which is almost always a fixed amount, is easy to work into any established budget. Additional medical-related expenses to be on the lookout for are copays, deductibles, and coinsurance.
A deductible is what’s paid towards covered services before the insurance pays, and the copay is an additional amount that’s paid out-of-pocket once the deductible is covered. Coinsurance is a percentage owed on any covered services that remain after the deductible is paid.
All of these expenses are considered out-of-pocket and should be compiled along with your premium to figure out what your maximum expenses will be.
Other supplemental health expenditures like eyeglasses or physical therapy should also be included with your estimated total. It’s possible to lose track of impending payments, leading to an accumulation of non-consumer medical debt, so identifying and delegating funds appropriately is good for preventing any possible financial issues.
What Can Be Cut Back
Ideally, all medical expenses should surpass no more than 5% of your total income. Having such a narrow limit can seem difficult if not outright impossible, but don’t let the idea of developing an efficient budget discourage you. Having a tight budget means going through and identifying any loose ends and unnecessary spending.
In regards to the price of insurance, researching affordable and effective plans is a good start for insuring you’re not spending more than necessary on your health expenses. Taking on a higher deductible may be advantageous to some, as it lowers the cost of your premium; for those who don’t visit a physician or medical center often, this can be useful.
Seeking out a generic version of your prescription is also a way to be frugal towards your out-of-pocket medical expenses.
Specialized Saving Accounts
While personal budgeting gives you control and careful overview of your assets, it can be overwhelming to engage thoroughly with your financial life. Fortunately, savings accounts designated for regulating health costs are available and serve as a convenient way to guarantee payments are made without the stress caused by constantly peering over a budget sheet.
The money placed into a health savings account (HSA), for example, is tax-exempt and can be reserved for annual health care costs. Designated funds carry over from one year to the next, and money designated towards the account should either be deducted from your income when taxes are due or, depending on the circumstance, your employer should provide the option to withhold untaxed funds from your paycheck.
If you’re comfortable with your employer being more involved with distributing your funds, then a health reimbursement arrangement (HRA) might be best. It’s an account designated for health expenses that are arranged by your employer, and they are in control of what the saved money can be spent on.
On the other hand, an FSA, or flexible spending account, functions much like an HRA, without the benefit of having funds roll over each year; this type of account is best for short term and anticipated expenses.
Dealing With Debt
As hard as we try to prevent the accumulation of unwanted debt, accidents and other unanticipated circumstances can occur that throw us off-budget.
In some cases, you may go through a period of time where medical bills are unpayable since funds are already so tightly allocated. During this span of time, the hospital or facility you received treatment from may sell your unpaid bills to a collection agency. The agency will make a persistent effort to contact you through multiple channels, such as phone calls and letters until the debt is repaid.
Having outstanding debt can negatively affect your credit score, as the collections listing will be present on your FICO credit report for at least seven years. Ignoring outstanding debt can lead to further issues, as the collectors will file a lawsuit against you. If in a position where paying your total bill, either at once or over time, is totally out of the question, then negotiating with your medical provider for a lower charge is possible.
This wouldn’t be an attempt at getting away from paying for debt. You’d want to present your medical provider with the truth of your financial situation. Then try to work out a payment plan that would be feasible for you to pay off within a considerable period of time.
Your medical bills should become the priority of your budget, especially if you already have a debt owed. While most forms of debt are able to be satisfied by a wide variety of payment options, medical bills are more rigid, and shouldn’t be ignored. Make it a priority to organize an efficient way to pay off your medical bills.
There are plenty of options out there that can help you develop your own effective and cost-efficient health care budget. Knowing your health is covered is important for lessening at least one of life’s worries.